Question
5. The utility U ( x , y ) = xy and consumer has income $120. Initially, P x = 4 and P y =
5. The utility U(x, y) = xy and consumer has income $120. Initially, Px= 4 and Py= 1.
a). Calculate the income and substitution effects of a decrease in the price of food to $3.
b) Calculate the compensating variation of the price change.
c) Calculate the equivalent variation of the price change.
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Global Business Today
Authors: Charles W. L. Hill Dr, G. Tomas M. Hult
10th edition
1259686698, 978-1259686696
